02/23/2009 09:00 AM Senate FINANCE

SENATE BILL NO. 93                                                                                                            
                                                                                                                                
     "An Act relating to a municipal property tax credit for                                                                    
    an improvement that aids in improving air quality."                                                                         
                                                                                                                                
9:38:56 AM                                                                                                                    
                                                                                                                                
SENATOR JOE PASKVAN, SPONSOR, explained SB 93, the Municipal                                                                    
Air Quality Property Tax Credit (from Sponsor Statement,                                                                        
Copy on File):                                                                                                                  
                                                                                                                                
     Some communities in Alaska  have been designated as non-                                                                   
     attainment  areas for PM  2.5 by the EPA  [Environmental                                                                   
     Protection  Agency]. Based  on the  requirements of  the                                                                   
     Clean  Air  Act,  the state  and  those  impacted  local                                                                   
     governments  have  three  years  to  develop  attainment                                                                   
     plans  designed  to bring  air quality  into  compliance                                                                   
     with federal air standards.                                                                                                
                                                                                                                                
Senator  Paskvan reported  that  interior Alaska  has an  air                                                                   
inversion,  which  creates a  problem  in cold  weather  when                                                                   
heating requirements  are at  the highest. Trapped  particles                                                                   
results  in  the  violation  of the  2.5  air  standards.  He                                                                   
continued:                                                                                                                      
                                                                                                                                
     SB  93  is  needed  as  a  first  step  to  allow  local                                                                   
     municipalities  the latitude  in  developing tax  credit                                                                   
     programs  to address  the  important  public health  and                                                                   
     community  compliance issues that  result from  poor air                                                                   
     quality.                                                                                                                   
                                                                                                                                
     Senate Bill 93 is designed  to provide optional tools to                                                                   
     municipalities  that can  be used  to create  incentives                                                                   
     for individuals to take actions  that will improve local                                                                   
     air quality and reduce fuel consumption.                                                                                   
                                                                                                                                
     SB  93 expands  the discretion  of  municipalities in  a                                                                   
     manner  that  allows,  by  ordinance,  the  creation  of                                                                   
     programs  that  will  offer  property  tax  credits  for                                                                   
     actions  that the local  governing body determines  will                                                                   
     improve   air   quality.   This   bill   requires   that                                                                   
     eligibility, conditions  and other criteria  for the tax                                                                   
     credits be established by ordinance.                                                                                       
                                                                                                                                
     Examples of how this proposed  legislation might be used                                                                   
     by a municipality include:                                                                                                 
                                                                                                                                
         · Incentives to residents to exchange old-style                                                                        
           wood  stoves for EPA  certified wood  stoves. Data                                                                   
           show    that    EPA    certified    wood    stoves                                                                   
           significantly  reduce  fine particulate  emissions                                                                   
           over  non-EPA stoves.  It  is in  the interest  of                                                                   
           any  community  with   air  quality  nonattainment                                                                   
           issues  to have citizens  who choose to  heat with                                                                   
           wood  do so in  the most environmentally  friendly                                                                   
           way.                                                                                                                 
         · Incentives    to    residences    or    commercial                                                                   
           businesses  to improve  the  energy efficiency  of                                                                   
           their  property.  Reduced fuel  consumption  would                                                                   
           lead  to reduced  emissions from  area heating  or                                                                   
           electricity   generation.   Incentives  could   be                                                                   
           based  on calculated  BTU savings, MW  reductions,                                                                   
           etc.                                                                                                                 
         · Incentives to convert from carbon based energy                                                                       
           consumption  to  alternative   energy  generation.                                                                   
           This  could involve  tax credits for  construction                                                                   
           and  use  of a  solar  array  or wind  turbine  to                                                                   
           power/heat residential or commercial facilities.                                                                     
                                                                                                                                
         The proposed legislation  would create a  full range                                                                   
         of options for a  local municipality to  address air                                                                   
         quality issues,  rather  than just  restriction  and                                                                   
         enforcement based options.                                                                                             
                                                                                                                                
Senator Paskvan referenced the attached zero fiscal note.                                                                       
                                                                                                                                
9:43:17 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  asked  if  the  borough  would  incur  EPA                                                                   
penalties  without  air  quality  clean-up.  Senator  Paskvan                                                                   
replied that the  federal government can impose  sanctions if                                                                   
nonattainment continues.  One immediate effect  was that Fort                                                                   
Wainwright  failed  consideration  for  a  brigade  of  5,000                                                                   
striker members  because of  nonattainment of 2.5  standards.                                                                   
He  thought  that  kind  of  sanction  would  continue  until                                                                   
compliance was reached.                                                                                                         
                                                                                                                                
Senator  Thomas  asked  if transportation  funding  would  be                                                                   
affected as  well by nonattainment.  Senator Paskvan  replied                                                                   
that the  region not  only lost  the troops,  but could  lose                                                                   
military  bases altogether.  Moving  the legislation  forward                                                                   
would demonstrate intent to come into compliance.                                                                               
                                                                                                                                
9:46:07 AM                                                                                                                    
                                                                                                                                
Senator Elton added  that as energy costs have  gone up, home                                                                   
owners are being forced out of  less expensive energy sources                                                                   
such as wood stoves because of compliance issues.                                                                               
                                                                                                                                
Senator  Huggins asked  if Fairbanks,  Anchorage, and  Juneau                                                                   
were under  the EPA standards.  Senator Paskvan did  not know                                                                   
which  communities  were  in   nonattainment.  The  statute's                                                                   
language  is broad  enough  to allow  a  local government  to                                                                   
provide tax  credits for the  increased energy  efficiency of                                                                   
existing structures as well as  for conversion from a carbon-                                                                   
based   source  to   an   alternative   energy  source.   The                                                                   
legislation is not only for communities  in nonattainment; it                                                                   
provides good social policy.                                                                                                    
                                                                                                                                
Senator Huggins  asked if someone  who owned multiple  rental                                                                   
properties  could  take  advantage of  the  program.  Senator                                                                   
Paskvan answered  that the legislation covers  residences and                                                                   
commercial   businesses.   The   local  community   has   the                                                                   
discretion to decide who they  want to benefit, the amount of                                                                   
the tax credit, and the period of time covered.                                                                                 
                                                                                                                                
9:49:41 AM                                                                                                                    
                                                                                                                                
Senator Huggins  asked if military communities  were exempted                                                                   
out of  the calculation.  Senator Paskvan  replied that  Fort                                                                   
Wainwright was specifically not exempted.                                                                                       
                                                                                                                                
Senator Olson  asked the  cost to  the municipalities  of the                                                                   
tax credit. Senator Paskvan reported  that those calculations                                                                   
had not been done on the local  level. The legislation is the                                                                   
first step  to promote  implementation  of the standard.  The                                                                   
intent is  to leave local  municipalities free to  decide how                                                                   
they want to approach the issue.                                                                                                
                                                                                                                                
Co-Chair Stedman opened public testimony.                                                                                       
                                                                                                                                
JAMES CONNER,  AIR QUALITY  SPECIALIST, FAIRBANKS  NORTH STAR                                                                   
BOROUGH (testified  via teleconference), spoke  in support of                                                                   
the legislation. He read from a statement:                                                                                      
                                                                                                                                
     Within the greater Fairbanks  area, the fine particulate                                                                   
     pollution fails  to meet the EPA's National  Ambient Air                                                                   
     Quality  Standard  20  to  30 times  each  winter.  This                                                                   
     health-based  standard  was  changed in  September  2006                                                                   
     based    on   the   EPA's    Science   Advisory    Board                                                                   
     recommendations,  lowering  the allowable  concentration                                                                   
     of fine particulates from  65 to 35 micrograms per cubic                                                                   
     meter (ug/m3)  for a 24-hour  average. There is  also an                                                                   
     annual  standard  that  was  left  at  15  ug/m3.  These                                                                   
     recommendations  were  based  on many  extensive  health                                                                   
     studies   over  a   five-year   period.  These   studies                                                                   
     indicated  that   even  short  term  exposure   to  fine                                                                   
     particulates can result in  new cases of respiratory and                                                                   
     heart disease.  This is truly a public  health issue, in                                                                   
     addition to being an economic issue.                                                                                       
                                                                                                                                
     The  fine particulate  pollution is  exacerbated in  the                                                                   
     winter because  the surrounding hills, the  stagnant air                                                                   
     flow, and  temperature inversions trap  the particulates                                                                   
     produced   locally.  These   are   coming  mostly   from                                                                   
     transportation and space heating.                                                                                          
                                                                                                                                
     During  the summer,  space heating  demands are  reduced                                                                   
     and the pollution produced  is cleared out with wind and                                                                   
     rain  before  it  can accumulate  to  dangerous  levels,                                                                   
     except  when  we  experience  wildland  fires.  We  have                                                                   
     experienced  concentrations  above  1000  ug/m3  in  the                                                                   
     summer due  to wildland fires,  but we are  permitted to                                                                   
     exclude  these natural  emissions from  our 24-hour  and                                                                   
     annual averages,  because they are not  man-made, unless                                                                   
     we start the fires as a resource management strategy.                                                                      
                                                                                                                                
     In  Fairbanks, we  depend  on the  clean  summer air  to                                                                   
     average  with the  polluted air  in the  winter to  stay                                                                   
     below the annual  limit of 15 ug/m3. This  is one reason                                                                   
     it is  important to  reduce the  number and severity  of                                                                   
     the winter emissions. If  we violate the winter average,                                                                   
     we  need  to  extend  those  winter  controls  into  the                                                                   
     summer.                                                                                                                    
                                                                                                                                
9:54:48 AM                                                                                                                    
                                                                                                                                
     The timeline associated with  the EPA action proceeds 90                                                                   
     days   from  the   publication   of  the   nonattainment                                                                   
     designation  in the  federal register.  That starts  the                                                                   
     clock,  and then we  have three years  to submit  to the                                                                   
     EPA  an air quality  control plan  demonstrating  how we                                                                   
     will attain  the standard  within five years.  Once that                                                                   
     federal  register  designation  is  published,  all  new                                                                   
     construction  projects in  the designated  nonattainment                                                                   
     area are  then required  to demonstrate conformity  with                                                                   
     an approved  air quality control plan, the  plan we have                                                                   
     three years to submit, and  requires EPA approval. Since                                                                   
     this plan takes  time to create, there will  likely be a                                                                   
     period  when  conformity  cannot be  met,  and  economic                                                                   
     development of the area can  be affected. However, there                                                                   
     is  a  one-year  grace  period  that  starts  with  that                                                                   
     federal register designation  date where new projects do                                                                   
     not have  to demonstrate conformity. If  the state fails                                                                   
     to submit  a plan  or show progress  in cleaning  up the                                                                   
     air, the EPA can begin to  withhold federal funds, first                                                                   
     in  the designated  area  and eventually  to the  entire                                                                   
     state.                                                                                                                     
                                                                                                                                
     An area  or a county is  allowed one exceedance  of this                                                                   
     health  standard  per  year. The  second  exceedance  is                                                                   
     considered  a violation that  can bring a  nonattainment                                                                   
     designation to the area.  The number and severity of the                                                                   
     exceedances   after  that  simply  further   jeopardizes                                                                   
     public   health  and   the   economic  environment   for                                                                   
     development, and  the difficulty to eventually  meet the                                                                   
     standard.                                                                                                                  
                                                                                                                                
     SB 93 gives the Fairbanks  North Star Borough a means to                                                                   
     provide  a   voluntary  incentive  program   to  borough                                                                   
     residences and  businesses to improve the  efficiency of                                                                   
     their  homes  and  businesses  in  a  manner  that  will                                                                   
     improve air quality and efficiency.  As the high cost of                                                                   
     energy has driven residents  to lower costing fuels such                                                                   
     as wood  and coal,  this bill  help further reduce  this                                                                   
     cost and higher emissions.                                                                                                 
                                                                                                                                
9:57:13 AM                                                                                                                    
                                                                                                                                
NADINE  WINTERS,   ASSEMBLY  MEMBER,  FAIRBANKS   NORTH  STAR                                                                   
BOROUGH (testified  via teleconference), spoke  in support of                                                                   
SB 93. Fairbanks has an air quality  issue and is looking for                                                                   
a way  to  protect the  health of  residents and  as well  as                                                                   
long-term  economic viability.  The bill  provides a  tool to                                                                   
meet both needs.                                                                                                                
                                                                                                                                
Co-Chair Stedman closed public testimony.                                                                                       
                                                                                                                                
Co-Chair Stedman  asked if there  would be a federal  penalty                                                                   
against  the state  if the  legislature  did not  act on  the                                                                   
bill. Senator Paskvan  answered that the penalty  would be on                                                                   
communities  that  are  in  nonattainment.   There  could  be                                                                   
various consequences,  including withdrawal of  federal funds                                                                   
for  highways.  He  thought  the   best  alternative  was  to                                                                   
establish policy to get local  municipalities to move towards                                                                   
attainment.                                                                                                                     
                                                                                                                                
SB  93   was  HEARD  and   HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
10:00:16 AM